A little more time for Social Security and Medicare funds

This episode discusses the extended financial viability of Social Security and Medicare, highlighting the challenges and implications for future beneficiaries.

1. Social Security and Medicare funds are projected to last longer than expected, but significant challenges remain post-2035.
2. The ratio of workers to beneficiaries is declining, worsening the financial strain on these programs.
3. Rising wages for lower-income workers have temporarily improved the financial outlook for these trust funds.
4. Housing market dynamics are complicating retirement planning, with many older homeowners unable to downsize effectively.
5. Policy changes and increased public awareness are needed to address the impending financial challenges of these critical programs.

1: Introduction

Amy Scott sets the stage by discussing the latest financial projections for Social Security and Medicare. Amy Scott: "The so-called 'go broke' date for Social Security has been pushed back to 2035."

2: Economic Analysis

Economic experts discuss the underlying issues of funding and demographic changes affecting Social Security and Medicare. Bill Sweeney: "That number is under three today, and it's expected to get closer to two."

3: Housing Market Impact

Discussion on how the housing market affects retirement security, featuring insights from reporter Paula Spann. Paula Spann: "The problem with these folks in New Hampshire is that as their house gained value, so did everything else around them."

4: Corporate and Economic News

Updates on other economic news, including Reddit's financial performance post-IPO. Elizabeth Troval: "Reddit posted its quarterly earnings for the first time since its March IPO."

1. Review Retirement Plans: Regularly update your retirement planning in light of changing economic conditions.
2. Consider Housing Options Early: Explore housing options well before retirement to avoid market volatility.
3. Stay Informed on Policy Changes: Keep up with changes in retirement-related policies to better plan for future needs.
4. Diversify Investments: Reduce reliance on single assets like home equity for retirement funding.
5. Engage in Financial Education: Increase your understanding of personal finance, especially regarding retirement and investments.

The good news: The forecasted date at which the Social Security and Medicare trust fund can’t pay full benefits for everyone was pushed back a few years in a report issued Monday. Bad news: That day is still coming, unless Congress acts. Also: aging in place or stuck in place? The challenges of homeownership later in life. Later in the episode: Reddit’s revenue and union organizing efforts in the South.

People

Amy Scott, Bill Sweeney, Paula Spann, Elizabeth Troval

Companies

AARP, The New York Times, Reddit

Books

None

Guest Name(s):

Paula Spann

Content Warnings:

None

Amy Scott
Coming up on the program today, going broke, going public, and going down to Alabama. From american public media, this is marketplace in Baltimore. I'm Amy Scott, in for Kai Risdahl. It's Tuesday, May 7. Good to have you with us.

There's some moderately good news this week for those who depend or soon will depend on Medicare and Social Security benefit. The money that pays for those programs will last a little longer than previously expected. Per the latest reports to Congress, the so called go broke date for Social Security has been pushed back one year to 2035. For Medicare, that dates been extended an additional five years to 2036. What happens after that remains a huge problem to solve, though marketplaces Sabri Benoshur has more.

Sabri Benoshur
If the Pentagon wants money, Congress decides, or sometimes fails to decide to give it. Also how much to give and how to pay for it. That is not how Social Security and Medicare work. The Social Security and Medicare programs operate out of trust funds. Theyre not part of the federal budget.

Bill Sweeney is senior vice president for government affairs at AARP. Money goes into these trust funds from taxes on our paychecks and goes out to people whove reached retirement age. No Congress, just formulas and math. Unfortunately, the math isn't mathing. When the program was set up, there were about four workers for every person receiving Social Security benefits.

Bill Sweeney
That number is under three today, and it's expected to get closer to two. So by about 2033, the formula starts to break. Social Security and Medicare do not go broke. They just can't pay what they're supposed to. Will McBride is vice president of federal tax policy at the Tax foundation.

Sabri Benoshur
This projection indicates that benefits will be cut immediately after 2033 by 21%, which is awful. Teresa Gillarducci is a professor of economics at the new School for Social Research. It will trigger huge increases in poverty rates. The date at which Social Security and Medicare falls short was actually pushed out a few years. This forecast helped by rising wages for lower income workers, Gillardus says.

But it's been floating around 2035, four decades. People who study politics say that Congress. Probably won't do anything until we're right on top of that date, and by. Then, it will be much more expensive to fix. In New York, I'm Sabri Ben ashore.

Amy Scott
For marketplace on Wall street today. A little up, a little down. We'll have the details when we do the numbers.

Just as Medicare and Social Security have go broke dates, I guess we kind of do, too. Retirement planning is a source of stress for many of us. And according to data from the National Institute on Retirement Security. More than half of Americans are worried they won't achieve financial security in retirement. And then to make matters worse, while certain assets are meant to be boons later in life, home ownership doesn't always pan out the way we might expect.

Paula Spann wrote about that for the New York Times and joins me now. Paula, welcome to the program. Thanks, Amy. You start your piece with the story of a retired couple in New Hampshire who are kind of stuck. They'd like to move, but find it's not so easy.

Tell us about their situation. Well, they did what traditionally people do if they can. They bought a house when they were younger. They paid off the mortgage. And then you have your ATM, your piggy bank.

Paula Spann
You have this appreciated asset that you can sell and downsize if your kids leave, or you can sell to fund assisted living if you need it, or you can stay in it and borrow against the house to fund your retirement when your income drops. The problem with these folks in New Hampshire is that as their house gained value from rising housing prices, so did everything else around them, and they found it hard to find a place to move into, a place that was smaller, a place that had fewer steps and where they didn't have to shovel snow or mow the lawn. So there's a question of where do you go? And that led an economist from the Urban Institute to say to me, our folks aging in place, or are they stuck in place because this traditional pattern has shifted? And, of course, there is probably a young family that would love to buy that couple's house and move into it.

Amy Scott
How is this gumming up the housing market? Well, a couple of things have shifted. First of all, this idea of your house as an ATM requires that you've mostly paid off the house. But the number of older Americans who still have a mortgage has been climbing fairly sharply for several decades. So it was 24% in 1989, and now it's well over 40%.

Paula Spann
And people owe more, also adjusted for inflation. So even though their own housing equity has risen sharply, it still may not be enough to fund their retirement if they don't borrow against it. We've talked about how builders just aren't building a lot of entry level housing, period. But sometimes that so called entry level housing is actually what older homeowners are looking for. Right?

Amy Scott
Smaller homes, less space, and as you mentioned, fewer stairs. Yes. So this older couple, they did finally have a happy ending, by the way, Amy. Oh, good. I heard from them a couple of days ago they did find a house.

Paula Spann
It was a two floor house but there was a bedroom and a bathroom on the first floor. But they said the competition was intense. The price was a little stomach churning. They had to make a cash offer. That is not an option that's available to a whole lot of older homeowners looking to downsize.

Amy Scott
You write that for black and hispanic homeowners, more of their wealth is tied up in their houses as opposed to the stock market or in savings. That's right. A lot of their wealth is tied up in this house, and they may struggle to hold onto it. And that's because historically, black and hispanic workers were lower paid, steered into lower paying occupations. Now their Social Security checks are lower because of that.

Paula Spann
So these houses are not going to be likely to fund their retirement, and they are more likely to be cost burdened than white homeowners. What are some solutions from the experts you talk to? Well, there are some things that policy makers could do. For one thing, lenders really ought to be broadening their criteria for creditworthiness. I've written in the past about people who own multiple properties.

They have big retirement accounts, they have plenty of money, but they get turned down for mortgages because their income is lower. I mean, that's just not really sensible. So overall, is it still better to be a homeowner than a renter? Well, yes, overall, it still is. You are less likely to be cost burdened and you're less at the mercy of a landlord.

But there is this sort of log jam of older people with lots of equity looking to get out of their houses and younger people needing houses. And a lot of people, not just older but younger ones, feeling stuck where they are. All right. Paula Spann is a reporter with the New York Times. She writes the new old Age column.

Amy Scott
Thanks so much for sharing your reporting. Thanks, Amy.

As corporate earnings season rolls on, there was a newcomer on the calendar today. Reddit posted its quarterly earnings for the first time since its March IPO, a net loss of $575 million, though revenue was up. The web forum, where users discuss the news, get skincare advice, even run up stock prices, has not itself been much of a moneymaker so far. So today we're going to do a little TLDR. That's Reddit speak for summary on who is buying what Reddit is selling.

And also, what exactly is Reddit selling these days? Marketplaces. Elizabeth Troval has that story. Mintel consultant BJ Pitchman says there's no limit to the data pit that is Reddit. If you're into camping, there is a.

Subreddit called camping campers ask questions, give advice, rate gear. It's a trove of product information, which is why he hopes the platform gets better at targeted ads. To date, they haven't done a great job of it, to be honest. They have struggled to be profitable. That's why AI is a big part of Reddit's new plan, says Samantha Shorey with Ut Austin.

A lot of this information is written in a way that is simple, direct, and informative. That's super helpful to AI developers who are looking to train models to produce information that is accessible, informative. Selling data may be good for revenue, but it's not so good for data scientists like Stevie Chancellor with University of Minnesota, who researches mental health. Quite frankly, like we can't afford to pay what companies pay. Though Reddit still has that old school feel, the newly public company has bills to pay.

It has some 2000 staff, says Lehigh University professor Donald Bowen. They need to pay for more servers. And hard drives than they ever have. Because their user base continues to grow and produce new content. And now, since Reddit is public, we can finally learn more about the company's ad revenue growth metrics and data licensing.

I'm Elizabeth Troval. Her marketplace, the Chinese company that owns TikTok, is suing to challenge a new law requiring byteDance to sell off its social media app by January or face an outright ban in this country. The fact that Congress and the White House are involved at all in this dispute is a little unusual. That's because the details of deciding whether or not a foreign company can invest in a US business or own it outright is usually left to the Committee on Foreign Investment in the United States. CFIUS for short marketplaces Justin Ho has more on what the committee is and what it's been up to.

Bill Sweeney
CFIUS is made up of representatives from a grab bag of government agencies with big national security responsibilities, including the departments of Defense and Homeland Security. We also have agencies who have economic and commercial responsibilities, so including Department of Commerce, the US Trade representative's office, State Department. Thats Emily Kilkrease. She used to be a staffer at the trade representatives office and the Commerce Department, and she represented both agencies on CFIUs. Now shes at the center for a new American Security.

Kilcrease says the committees goal is to look at foreign investment like a foreign company buying an american one and figure out whether it raises a national security concern. Its kind of a flexible definition of national security, and it can take into consideration economic considerations, but it always has to come back to a national security. Risk, for instance, if a foreign company wants to buy an american military supplier. But also protection of critical infrastructure, including cybersecurity elements, that certainly counts as national security. We're worried about supply chains more broadly these days, so that would certainly be something that would be considered national security.

The committee didn't always have such a broad purview. It was first created in 1975 to study foreign investment. Back then, the US was getting a little insecure about Japan. Japanese exports were taking off in the US market, including cars, consumer electronics, and semiconductors. And the Japanese were making investments, including in real estate like hotels in Hawaii.

And the Rockefeller center was acquired by Mitsubishi real estate, you know, and so there was quite some concern that Japan was buying up the United States. Ulrika Shada is a professor of japanese business at UC San Diego. She says trade frictions with Japan got hotter through the eighties, especially after a number of japanese companies tried to purchase american firms that supplied the military. So in 88, Congress made a big change to CFIUS, specifically formulated to empower CFIUS to stop foreign acquisitions of us companies. This allowed the president to jump in and block a transaction on national security concerns if CFIUS recommended it.

But by the early nineties, Japan's economy had faded and with it went away the trade frictions between the US and Japan. Fast forward to the Chinas growing economic power. Rob Atkinson, president of the information Technology and Innovation foundation, says the US started getting concerned that if a chinese company bought an american one, basically they have. The keys to the kingdom. They can take all of the technology, the patents, the knowledge, all of that, and they can move it over to China and build up their own industry.

So in 2018, Congress expanded CFIUS power again, allowing it to investigate smaller foreign investments. Think venture capital. It can also block sensitive real estate deals, like if a chinese company wanted to buy some land next to a military base. In the time since, the number of deals under CFIUS review has been steadily increasing. The White House has only blocked a handful of deals in the last decade.

But Emily Kilkrease at the center for a New American Security says the mere possibility of a CFIUS investigation can have a chilling effect. Theres even more cases where CFIUS has identified concerns and the transaction parties decide that theyre just going to voluntarily abandon the deal, so to speak, and that isnt always a public thing. CFIUS also has the option of recommending tweaks to the deal rather than blocking it outright. One concern is whether the uptick in CFIUS investigations will cause foreign investment to slow down. Rob Atkinson at the Information Technology and Innovation foundation says foreign investment can be really beneficial.

Sabri Benoshur
The best kind of foreign investment for the United States is a company coming in here and building something and saying we want to be here. We want a producer. We want to hire american workers here, Atkinson says. Those are the kinds of foreign investments that CFIUS should encourage. I'm Justin Ho for marketplace.

E
Coming up, being financially secure is a great mood stabilizer. No prescription required. But first, let's do the numbers. The Dow Jones industrial average gained 31 points, less than 110 percent, to finish at 38,884. The Nasdaq lost 16 points, 110 percent.

Amy Scott
It closed at 16,332. And the S and P 500 added six points. One tenths percent end at 51 87. We heard from Elizabeth Troval about how exactly Reddit makes money as they posted their first quarterly earnings since their ipo in March. That news came after the close Reddit added two and three tenths percent.

Looking at some other social media stocks. Pinterest grew one and a quarter percent. Alphabet, which owns YouTube, was up 1910 percent. Bonds rose. The yield on the ten year t note fell to 4.46%.

You're listening to marketplace.

Bill Sweeney
Hey, everyone, it's Reema Grace, host of this is uncomfortable. If you're looking for some good recommendations on books to read, well, you should join. This is uncomfortable's summer book club. Every other week in our newsletter, we'll share a new book that'll make you rethink your relationship to money, class and work, while also featuring an interview with the author or an expert on the topic. Plus, when you join, you'll be entered in a giveaway where you could win some this is uncomfortable merch.

Be sure to check it out. Sign up today@marketplace.org. Bookclub.

Amy Scott
This is Marketplace. I'm Amy Scott. The United Autoworkers scored another big win in the south late last month. Workers at a Volkswagen plant in Chattanooga, Tennessee, voted to join the UAW after two previous union drives there had failed. It's part of a campaign to organize thousands of workers at foreign owned automakers across the south.

The next test will be a union vote at two Mercedes Benz plants near Tuscaloosa, Alabama. Marketplace's Mitchell Hartman has this report. I met a huge racetrack outside Birmingham on a sunny Sunday in April for the IndyCar Grand Prix. A massive crowd packs the the bleachers as the souped up sports cars roll to the starting line. It's time for those most famous words in all of sports drivers, start your engines.

Sabri Benoshur
There's also something going on above the track. A small airplane circles overhead, pulling a banner that reads, support auto workers union solidarity. It's encouraging Alabama Mercedes Benz workers to vote yes in their union election next week. Join the United Auto Workers and help spread unionization across the south. IndyCar fan Scott Taylor isn't a fan of the UAW.

F
The reason Mercedes came to Alabama is because there wasn't a union. If you make yourself the same price as the guys in Detroit, you're going to drive Mercedes out of here. But the UAW's also got supporters. Carlton Vaughn was shopping for indian car merch. Unions in America have been not looked at in a good light.

Sabri Benoshur
If you want people who are going to get behind your cars and you're a union worker in the automotive industry, like the race is the way to do it. I'm down. Drive about half an hour west, and you come to Mercedes Benz massive vehicle and battery complex tucked among rolling hills along I 20. It's on 1000 acres the state of Alabama. Gifted in the early 1990s, Mercedes has invested billions since then.

The company employs about 5200 production workers who make some of the highest blue collar wages in the state. From where I'm from, Mercedes seemed like, you know, the ideal job. They paid well, so much better benefits. I met 24 year old Moesha Chandler at UAW Local 112, headquarters for the Mercedes Workers Vote yes campaign. It's in a strip mall between a dollar general and a family dollar store a few miles from the plant.

Chandler makes $24.50 an hour and struggles to make ends meet in nearby Tuscaloosa, a college town where rents are high. Her brother, a union auto worker at Ford in Michigan, just got a big raise under the UAW's new contract with the big three. I'm not too much of a picky worker. I know I didn't come to work at a cupcake factory, but I do feel like I should be properly compensated, especially from the wear and tear that it causes on your body. At his ranch home with a pool out back, Mercedes worker Jay White says he's doing just fine.

F
We work in a facility that's air conditioned and heated. We are not pulling fresh lumber off the green chain, laying asphalt. We have a very nice job. White's active in a group that urges fellow workers to vote no on unionizing. He makes the top wage, 34 an hour, and says with Alabama's low cost of living, he's doing as well as UAW workers in the north without the interference of a union.

We recognize individual responsibility. That's why we're right to work. State, which contributes to the anti union environment here. Gallup recently found two thirds of people in the south disapprove of unions. In the rest of the country, its slightly less than half.

Sabri Benoshur
The company is showing vote no videos like this one to workers on the job. What do unions cost? Weve already spent some time talking about union membership dues. The NLRB is investigating UAW allegations of unfair labor practices. Mercedes Benz didnt respond to questions by our deadline.

Meanwhile, republican political and business leaders have warned unionization could drive major employers out. University of Alabama labor economist Peter Brumman thinks that's a bit far fetched. Mercedes has been here for a long time. The other manufacturers had made significant investments. It's going to be hard for them to leave.

And after multiple union failures in the. South, I don't think it's unthinkable they can win. Brumman says politics favors the anti UAW side, but economics, not so much. Alabama is definitely republican, but I think when you see similar workers making more, yeah, sure, I'm gonna vote republican on those other issues. But when it comes to pay increase, that's like in your pocket.

After the Mercedes vote next week, the UAW organizing drive moves on to a Hyundai plant in Montgomery and a Toyota facility in Missouri. I'm Mitchell Hartman for Marketplace.

Amy Scott
In last Friday's weaker than expected jobs report, some industries did make gains, notably transportation. The transit and ground passenger transportation sector has added more than 20,000 jobs since April of last year. Good news for those looking to make a career switch, like the subject of today's installment of our series, my economy. My name's Liz Young. I use he him, his pronouns.

E
I'm in Denver, Colorado, and I'm a signal traction maintainer for the regional transportation district.

Before what I'm doing now, I was an actuarial analyst. The work was really interesting. I really liked the mathiness of it and the programming, but honestly, I was really unhappy with it. Like the whole time I was working 60 plus hours a week. When COVID happened, I had the perfect excuse to find my way out.

So I left.

I floated for a little while. I tried out grad school in a field. That didn't work out for me. I was trying to figure out where I wanted to land. I had applied for probably two dozen positions at regional transportation district.

The folks who run the light rail maintenance shop gave me a call and offered me an interview for service and cleaning, where you clean the inside and outside of the light rail vehicles. I came in and as a surprise to me, you know, they offered me the job on the spot.

So when I started, my wage was, you know, about 23 something an hour. I was making the same that I was like, actually a little more than when I left being an actuarial analyst. And now that I'm in signal power, if I were doing an apples to apples comparison, I'd be making more than double what I was making before.

Being financially secure is a great mood stabilizer. I know that I'm going to be able to pay for my mortgage. I'm going to be able to pay for my food. I can support my partner. I can do some fun stuff.

I can even travel a little bit if I want.

I learned pretty quickly when I was cleaning trains that this was the right career change for me. I get so much joy from doing this job. People like, comment regularly that, like, I look happy and I have a smile on my face. And that's, that's kind of new in my life, you know, at 36. And it's, it's nice to reflect on that.

Amy Scott
Liz Young working happily in public transit in Denver, Colorado. You can tell us about your economy@marketplace.org. Myeconomy this final note on the way out, I saw this in the Wall Street Journal. Gen Z is carrying more credit card debt than previous generations. According to the credit bureau transUnion, the average balance for 22 to 24 year olds is about $500 higher, adjusted for inflation, than for the same age group a decade ago.

The report says student loans, inflation and especially higher rents all play a role. Our digital and on demand team includes Carrie Barber, Jordan Mangy Dylan, Miette, Janet Wynn, Olga Oxman, Ellen Rolfes, Virginia K. Smith and Tony Wagner. Francesca Levy is the executive director of digital and on demand. And I'm Amy Scott.

We will be back tomorrow.

This is APM.

Bill Sweeney
Hey, everyone, it's Rima Grace, host of this is uncomfortable. If you're looking for some good recommendations on books to read well, you should join. This is uncomfortable's summer book club. Every other week in our newsletter, we'll share a new book that'll make you rethink your relationship to money, class and work, while also featuring an interview with the author or an expert on the topic. Plus, when you join, you'll be entered in a giveaway where you could win some this is uncomfortable merch.

Be sure to check it out. Sign up today@marketplace.org. Bookclub.